Reform to the Law of Public Registries, Commercial Code and the creation of the Registry of Final Beneficiary

On August 25, Law Number 1035 "Reform Law to Law No. 698 General Law of Public Registries and the Commercial Code of the Republic of Nicaragua" was published in La Gaceta Official Gazette. Through this law, the Registry of Final Beneficiary of Mercantile Companies (hereinafter RBF) is created as one more dependency of the National Registry System (SINRAE) of Nicaragua.

According to the reform, the RBF will have the following functions:

Register the final beneficiary information declared by each commercial entity.
Ensure the integrity, confidentiality, traceability and security of the data that said registry guards.
Guarantee the access of interested commercial companies and competent authorities to the information of the final beneficiary.

The creation of the RBF responds, according to the preamble to the bill, to an effort to "continue closing the gaps and fissures through which organized crime can carry out its actions..." and comply with the recommendations of the Financial Action Group International (GAFI), one of which establishes that “Countries must take measures to prevent the misuse of legal persons for money laundering or terrorist financing. Countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons, which competent authorities can obtain or have access to in a timely manner."

The relevance of the creation of the RBF lies mainly in the fact that, from the date of publication of Law 1035 (08-25-2020), commercial entities will have the obligation to inform and register their final beneficiaries before said registry and such Information will be public and must be updated periodically. In this sense, Law 1035 literally establishes "In relation to commercial companies existing prior to the publication of the law, they must present the information corresponding to their final beneficiaries according to the provisions issued by the National Directorate of Registries. ”

Now, it is worth asking the question: what is a final beneficiary? Law 1035 does not define it and therefore we must refer to other laws in which such a concept is defined. In this sense, Law 977 "Law against Money Laundering, Financing of Terrorism", provides the following definition of final beneficiary:

"Final beneficiary:
The natural person or persons in whose name an operation is carried out.
The natural person or persons who ultimately own or control a customer, including the natural person or persons who exercise ownership or control through a chain of ownership or other means of control other than direct control.
The natural person or persons who ultimately own or control a trust, including the natural person or persons who own or control the trust through a chain of ownership or other means of control other than direct control and also to the natural person or persons in whose name a trust operation is carried out,

The natural person or persons who is or are the ultimate beneficiary of a beneficiary under a life insurance policy or other investment-linked insurance policy. In the case of subparagraphs “b” and “c”, the term “property” refers to both property exercised in fact and property obtained through legal means. Likewise, the term "control" deals with the ability to make and impose relevant decisions, when this is exercised through both formal and informal means.

Based on the foregoing, we can say that all commercial entities must declare and register their final beneficiaries, that is, the natural persons who ultimately have ownership or control of such commercial entities.

However, the reform of the law is limited mainly to creating the GNB but does not establish provisions related to its operation. These provisions, according to the above, will be issued by the Special Commission of Registries. In this sense, the National Directorate of Registries, through a circular dated August 24, 2020, indicates that it has initiated a review and adjustment process for the purpose of incorporating into its regulations fundamental aspects related to the RBF as well as deadlines, procedures, costs, and others.

In short, although it is true that there is already a legal obligation to register the final beneficiary of commercial entities, the means to comply with such obligation have not yet been made available to the obligated subjects (commercial entities).